Dhaka, Bangladesh (BBN) - The amount of classified loans in the country’s banking system increased significantly in the first quarter (Q1) of 2014 due mainly to the lack of proper follow-up of rescheduled loans by some banks.
The volume of default loans increased by 18.70 percent to BDT 481.72 billion in the January-March period of 2014 from BDT 405.83 billion in the previous quarter of the last calendar year.
The share of the non-performing loans (NPL) rose to 10.45 per cent in the period under review from 8.93 per cent in the previous quarter, according to the central bank statistics.
The central bank will ask the commercial banks to reduce the amount of classified loans through expediting recovery drives across the country.
“We’ll ask the banks for taking effective measures to bring down the share of NPL at below 10 per cent by the end of second quarter,” a senior official of the Bangladesh Bank (BB), told BBN in Dhaka.
He also said the BB will not continue the relaxation of loan rescheduling policy after June this year.
On December 23 last year, the central bank relaxed the loan rescheduling policy for the next six months to facilitate financing for the businesses, affected by political unrest.
The amount of default loan dropped significantly in the last quarter of 2013 as a substantial amount of loan was rescheduled by the banks taking advantage of loan rescheduling policy relaxation, according to a BB senior official. “A portion of rescheduled loan has already turned into classified ones because of weak monitoring and supervision of the commercial banks.”
The total amount of default loans with the four state-owned commercial banks rose to BDT 86.89 billion during the period under review from BDT 166.06 billion of the previous quarter.
On the other hand, the total amount of classified loans with 39 private commercial banks (PCBs) reached BDT 185.29 billion from BDT 143.16 billion.
However, the classified loans of nine foreign commercial banks came down to BDT 12.27 billion from BDT 13.03 billion.
The default loans with four development finance institutions rose to BDT 97.27 billion in the first quarter from BDT 83.57 billion in the fourth quarter of the last calendar year, the BB data showed.
BBN/SSR/AD-13May14-11:38 am (BST)